The Government Accounting Standards Board (GASB) was established in 1984 for states and local government entities, and it was used in setting up Generally Accepted Accounting Principles (GAAP). It is an independent, non-governmental and non-profit organization regulatory body that is charged with the setting of the accounting and financial reporting standards for states and local government institutions (Generally Accepted Accounting Principles, 2015). GASB requires that the body is headed by seven full-time members among them full-time chairperson, vice-chair, and five other members. GASB deals with the accountability of the organizations fund accounting with the help of the American Institute of Certified Public Accountants (AICPA).
According to the guideline provided by AICPA, GASB accounting principles should be used if an organization is set up for public affairs in a state, town or municipality. The leading officers of GASB ought to be elected democratically with the majority of its governing body being appointed by another governmental organization. In instances where the organization is dissolved GASB assets go to the government (Lanzarotta, 2012). The major provision that requires the GASB fund reporting is based on the fact that the government has the power to appoint or control majority of the organizations board members and to dissolve the organization so that the organizations assets can be reverted to the government.
On the contrary, Generally Accepted Accounting Principles (GAAP) provides uniform minimum standards and guidelines for financial and accounting reporting. It provides appropriate measurements and classifications criteria for financial reporting. GAAP offers basic principles of governmental fund accounting necessary to the government due to the diverse nature of the operation and legal procedures that are conducted by the government. Due to this, GAAP requires that all government financial transactions and balances need not be recorded in single accounting entity. This is unlike private entities where the all the financial information has to be accounted for as a single entity. Instead, the government unit is accounted for through separate funds, each of which is a financial and accounting unit with a self-balancing set of accounts.
Based on the financial reporting, GAAP requires that appropriate interim financial statements and reports of the financial position be prepared so as to facilitate management control and legislative oversight (Governmental vs. Enterprise Fund Accounting, 1999). The comprehensive annual financial report (CAFR) should be prepared to cover all the primary activities of the government in order to provide discretely presented components units. The CAFR should contain an introductory section, financial section, and the statistical section.
GAAP is also a critical tool for the government planning, control, and evaluation of the budgetary processes. On this concept, GAAP requires that the government adopts budget systems that make use of the accounting system as the basis for the budgetary control. The government budgetary sector should include budgetary comparisons that are well supported by appropriate financial statements and schedules for the governmental funds for which budgets are adopted(Governmental vs. Enterprise Fund Accounting, 1999). The annual government budgetary comparison should present both the original and the final budgets for the fiscal year that is well supported by the cash inflows, outflows, balances and the budgetary basis. In addition, GAAP helps the government to measure the focus and basis of the accounting that has been applied and the manner in which it varies based on the type of fund and category of funds such as proprietary funds, fiduciary funds, and governmental funds.
BIBLIOGRAPHY \l 1033 Generally Accepted Accounting Principles. (2015, July 1). Retrieved from Chapter 80: http://www.ofm.wa.gov/policy/80.20.htm
Governmental vs. Enterprise Fund Accounting. (1999). PHA GAAP FLYER.
Lanzarotta, J. C. (2012). GASB or FASB. Government Financial Quartery .
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